Accounting Mistakes That Could Put Your Money Making On Hold
Accounting: it’s not the most fun experience for anyone trying to make serious money, but it is, unfortunately on of life’s necessities.
Accounting, though, isn’t just something that can take up your time, it’s also vital for keeping your cash-generating scheme ticking over, whatever that happens to be.
Unfortunately, many people can find themselves falling foul of the rules and get into trouble.
Here are the accounting hiccoughs you’ll want to avoid as you work your way towards earning your first million.
Remember the expenses scandal that rocked the UK political establishment? It was all to do with the fact that MPs weren’t declaring expenses when they should have or counting things as “expenses” in their accounts when they shouldn’t have.
MPs now have to stick to the rules, and so do you.
If you incur expenses on your way to making a profit, make sure that you document all of them. You want to ensure that you have an audit trail that matches up with your accounts so that if anyone launches an investigation, you’ve got the backup you need. Sites like https://www.myaccountingcourse.com/ provide more info.
Incorrect Employment Classification
Websites like http://www.qaccounting.com are trying to get the word out that incorrect employment classification is a serious issue and could land you with penalties.
It’s no secret that people want to reduce their tax bill as low as possible. Misclassifying yourself as a limited company however, when you’re an employee, can land you in trouble.
In 2000, the government launched something called IR35s. These were investigative tools that it could use to sniff out fraud and ensure that people played the game by the rules. Make sure that you are clear about your official employment role and not classified as something that you’re not. It could land you in trouble.
Failing To Keep Accounts For Five Years
The government today forces everyone to keep accounts for at least five years, just in case they want to go back over the record at some point to make sure that the correct tax has been paid.
The thought of the government prying through your personal finances is, of course, not a particularly fun idea. Nor does it seem consistent with its own data protection rules. Nevertheless, it’s something that it has granted itself the legal authority to do. You need to be ready, therefore, with any records that the law says you should have – currently five years of accounts.
Not Paying VAT
If you run a business, you not only have to pay income tax on any salary you pay yourself, but you also have to pay VAT if your income exceeds a particular threshold – around £82,500.
Thus, you need to keep track of your income from month to month. If it hops over the threshold figure for the year in any twelve-month rolling period, you’re liable to pay the extra tax on all the income.
Pro tip: don’t go over the threshold unless you’re sure you can recoup the different. Speak to an accountant if you’re unsure.